There is a little bit
of Beijer almost
2006 G & L Beijer AB Annual Report
everywhere
T o T h e s h a r e h o l d e r s
The Annual Meeting of shareholders
Will be held at 3 pm on Friday 27 April 2007 in Malmö Börshus, Skeppsbron 2, Malmö, Sweden.
Rightto paRticipateinthe annual Meetingof shaReholdeRs
In accordance with the Simplified Share Handling Act, which the company applies, shareholders who wish to participate in the Annual Meeting of shareholders must be entered in the Register of Shareholders maintained by the Swedish Central Securities Depository & Clearing Organisation, VPC, not later than Friday 20 April 2007. To be entitled to vote at the Annual Meeting, shareholders whose shares are nominee- registered through the trust department in a bank or private securities brokerage company must re-register their shares temporarily in their own name with VPC.
notification
Shareholders who wish to participate in the Annual Meeting must notify the Board of Directors not later than noon on Monday 23 April 2007 by mail to: G & L Beijer AB Norra Vallgatan 70, SE-211 22 Malmö,
Sweden; or by telephone +46 40-35 89 00; or by e-mail to info@gl.beijer.se. For information about the details required in a notification by e-mail, visit our website www.beijers.com.
dividend
The Board of Directors proposes a dividend of SEK 6.50 per share for the 2006 financial year and 3 May 2007 as the record day. Payment is expected to be remitted by VPC on 8 May 2007.
financial infoRMation 2007
• The Interim Report for the first quarter will be published on 26 April 2007.
• The Interim Report for the second quarter will be published on 17 August 2007.
• The Interim Report for the third quarter will be published on 19 October 2007.
• The Year-End Report for 2007 will be published on 8 February 2008.
• The Annual Report for 2007 will be published in April 2008.
Graphic Production: Beijer’s Publicity Department • Text: Lennart Carlsson, JLC Finanskonsult AB, Stockholm • Translation: Swedish Business Services, Weybridge Print: CA Andersson & Co, Malmö • Photos: Lars Owesson, Malmö, and others
2 Annual Meeting of shareholders 4 2006 Highlights
6 Managing Director’s Report 8 The Beijer share
10 The trading companies’ renaissance in the stock market
12 Business concept, objectives, strategy 14 2006 Operations
16 Business area Beijer Ref
20 Business area Beijer Industrial Technology 24 Board of Directors
25 Senior Executives and Auditors 26 Corporate governance report 28 Internal control report
30 Directors’ Report
33 Consolidated profit and loss account 34 Consolidated balance sheet
35 Consolidated change in equity 36 Consolidated cash flow statement
37 Parent company profit and loss account 38 Parent company balance sheet
39 Parent company change in equity 40 Parent company cash flow statement
41 Notes to the financial statements 60 Audit Report
61 Five-Year Summary 62 Addresses
Contents
2006
2006 Highlights
Financial Highlights
• Sales increased by 11 per cent to SEK 2,592M
• Operating profit increased by 55 per cent to SEK 172M
• Profit after tax rose to SEK 109M
• Profit per share after tax amounted to SEK 17.59
• The Board of Directors proposes a dividend of SEK 6.50 per share and a share split 2:1
sek m 3000
2500
2000
1500
1000
500
0 02 03 04 05 06
Net sales
sek m 180
150
120
90
60
30
0 02 03 04 05 06
Profit before tax
sek m 60
50
40
30
20
10
0 Q1 Q2 Q3 Q4
Profit before tax, quarterly
20042005 2006
2004 2005 2006
Sales, sek m 1973.7 2332.9 2592.2
Operating profit, sek m 59.7 110.6 171.8 Profit after tax, sek m 35.2 72.1 109.2 Profit per share after tax, sek 5.65 11.72 17.59 Dividend per share, sek* 4.25 5.00 6.50
*) For 2006, in accordance with the Board of Directors’ proposal
sek m 80 70 60 50 40 30 20 10
0 2004 2005 2006
Rolling profit before tax
Q1Q2 Q3Q4
sek m 160 140 120 100 80 60 40 20 0
Profit per quarter, left scale Rolling profit, four quarters, right scale
The figures for 2004-2006 are reported in accordance with IFRS whilst information for previous years is reported in accordance with reporting principles applicable at that time.
All the diagrams are adjusted for items affecting comparability and one-off items.
2006
Significant events
In January, Beijer Ref acquired the remaining 49 per cent of the shares in the Hungarian refrigeration wholesaler, Equinoxe SP. When G & L Beijer acquired Elsmark Holding A/S in June 2004, 51 per cent of the shares in Equinoxe were included as well as an option for the remaining 49 per cent, which G & L Beijer’s Beijer Ref business area has now exercised.
Equinoxe is the market leader in the refrigeration sector in Hungary and reports sales of approximately SEK 50M.
In March, the Beijer Ref business area won another significant order for dry coolers through the colla- boration between its sales company, TT-Coil A/S in Denmark and its manufacturing company, Asarums In- dustri AB. The order was the first suborder for a large infrastructure project in Cuba. It was delivered during the summer of 2006. The order value amounted to approximately SEK 1.2M.
Asarums Industri AB and TT-Coil A/S in Denmark won the order in competition with several alternative tech- nologies for conducting surplus heat away from diesel generators. The company’s expertise in manufacturing specially-adapted dry coolers finally swung the order in favour of Beijer.
In May, G & L Beijer acquired the operations within YGAB Eldfast AB in Västerås through its Beijer Indu- strial Technology business area. The operations report annual sales of approximately SEK 5M. YGAB sells and installs refractory materials for various types of furnaces. The principal customer groups are the foundry and steelworks industries. The acquisition strengthens Beijer Industrial Technology’s position in the refractory materials market, especially in the foundry segment. Beijer Industrial Technology has enjoyed strong growth within this segment in recent years.
In September, the Beijer Industrial Technology bu- siness area, together with SMS Demag AG of Ger- many, received an order for a new down coiler from SSAB Tunnplåt in Borlänge, Sweden. The investment in a new down coiler means that SSAB has taken a further step towards manufacturing advanced high- tensile steel qualities. The delivery comprises both mechanical equipment and electronic automation.
The delivery will be made in stages and the plant is expected to be in operation by the summer of 2008.
SMS Demag AG, which is the world leader within
steel-industry equipment, has already delivered equip- ment to SSAB in collaboration with G & L Beijer.
In October, G & L Beijer signed an agreement with Edw. H. Thomée AB, through its Industrial Techno- logy business area, for the sale of the company’s operations in ETC Tools within the business area’s consumer products division. The divested operations report annual sales of approximately SEK 25M. The sale of ETC Tools was a step in the company’s stated restructuring programme for the Industrial Technology business area’s consumer products division.
In November, G & L Beijer acquired the grinding materials operation from Logitool AB. The operation reports annual sales of approximately SEK 4M. The company’s product areas consist of conventional grinding materials, rotary files, and polishing materi- als, etc. The acquisition strengthens and supplements Beijer Industrial Technology’s existing product pro- gramme within the segment. The operation will be integrated into the grinding materials division within G & L Beijer Industri AB.
In December, G & L Beijer divested BOLTHi within the company’s consumer products division. BOLTHi sells mainly garden and outdoor lighting. As a result of the divestment, Beijer Industrial Technology has completely left the consumer products market in order to concentrate its resources on developing the core segments within industrial products and its hose and rubber operations.
At the end of December, G & L Beijer acquired the Danish refrigeration wholesaler, Air-Con AS, which reports annual sales of approximately SEK 40M.
The company is included in G & L Beijer’s accounts from January 2007. The vendor is Tesab, which is a franchise organisation for refrigeration installation contractors. The operation will continue as an inde- pendent company together with Beijer Ref´s other operations in Denmark. The acquisition will generate immediate cost savings whilst co-ordinated purchases will provide a potential for lower purchasing prices.
In the medium term, Beijer Ref will develop the ope- rations in Air-Con by broadening the product range and contributing technical expertise and support. As a result of the transaction, the co-operation between Beijer Ref and Tesab is enhanced. Tesab is one of Beijer Ref´s largest Swedish customers.
Managing Director’s Report
Overall, the Group reports its best year so far
G & L Beijer reports a very favourable development for 2006. Both turnover and profit reached record levels. We are clearly satisfied with the development although there were, as always, a number of pro- blems to address.
Bearing in mind that the Group operates in mature markets, it is remarkable that the strong growth achie- ved during the year was almost exclusively organic.
The main explanation for the significant growth is the strong economy, but the Group was also able to win market share. The volume growth combined with ef- ficient cost control led to a very good result.
The shareholders enjoyed a continued high total yield. Including dividend, the total yield amounted to more than 25 per cent during 2006.
In 2006, we received confirmation that the acqui- sition of Elsmark had met, and even surpassed, our original expectations. The excellent development for the Beijer Ref business area bears witness to this fact.
Beijer Ref has now established itself as a leading and well-known operator within the refrigeration sector in Europe, which bodes well for the future.
The Beijer Industrial Technology business area had a slightly tougher year. The core operations, industrial products and hose products, continued to develop positively with both increased sales and improved results. During the year, the business area solved the problems within the consumer products opera- tion. After several years of strong growth, the market scenario changed significantly during 2005 with ensuing strong price pressure. Following a change of strategy, we decided to divest the operation. This was implemented during the autumn of 2006. How- ever, we can confirm that the result of the business area’s investment in consumer products provided a positive overall outcome.
During the past three years, G & L Beijer has grown by more than 20 per cent per annum on average. In the same period, profit increased by more than 65 per cent per annum and the total yield of the Beijer share amounted to more than 40 per cent per an- num. Following the acquisition of Elsmark and the re- structuring of Beijer Industrial Technology, the Group has created a new platform for profitable growth in the future.
Managing Director’s Report
During the year, we carried out a strategy review aimed at staking out the direction for the next three to five years. Our ambition is to provide scope for growth for both business areas.
The target for Beijer Ref, to strengthen its position as the leading operator in Europe even further, stands.
The resources will be concentrated on the trading operation. The business area will develop its opera- tions through acquisition and organic growth in the existing geographic markets as well as through ac- quisition in new geographic markets in Europe. From a product viewpoint, there will be an increased focus on air conditioning which is a growth market.
The target for Beijer Industrial Technology is to raise its growth rate and achieve a significantly increased sales volume. Acquisitions will be given increased priority. The focus is on companies and operations within both existing and supplementary product areas.
”The shareholders have enjoyed continued high total yield”
pRospectsfoR 2007
Many analysts are of the opinion that the strong economy will continue in Europe during 2007.
G & L Beijer is predicting that it will be able to in- crease both its sales and profit for the 2007 full year.
Joen Magnusson Managing Director
The Beijer share
Including dividend, the total yield for 2006 was 25.4 per cent
shaRecapital
The share capital in G & L Beijer AB amounts to SEK 217,752,080, represented by 647,205 A shares and 5,574,283 B shares, amounting to 6,221,488 shares in total. Each share has a nominal value of SEK 35. Each A share entitles the owner to ten votes and each B share to one vote. All shares have equal rights to the company’s assets and profits.
owneRshipstRuctuRe
On 31 December 2006, G & L Beijer had 2,607 shareholders. Distribution of ownership is shown in the adjacent table.
MaRketvalueandtRading
Beijer’s market value measured as price paid was SEK 217 at the 2006 year end. The price paid was SEK 178 at the 2005 year end. Including a dividend of SEK 5.00, the total yield amounted to 25.4 per cent. The comparable index rose by 28.1 per cent.
The highest price paid during 2006 for the Beijer share was SEK 226 and the lowest SEK 156.50.
Trading of the company’s shares amounted to 1.5 million shares, equivalent to a value of SEK 203M.
The trading rate was approximately 24 per cent of the total number of shares.
pRofit
Profit per share after tax amounted to SEK 17.59 (11.72).
dividend
The Board of Directors proposes a dividend of SEK 6.50 (5.00) for the 2006 financial year. The divi- dend proposal is equivalent to 37 per cent (42.7) of the Group’s profit after tax for 2006 and 7.5 per cent (6.5) of shareholders’ equity at the 2006 year end.
The yield – the proposed dividend as a percentage of the latest price paid during the year – amounts to three per cent.
The G & L Beijer B share is listed on the OM Stockholm Exchange.
A unit of trading is equivalent to 100 shares.
sek18
15
12
9
6
3
0 02 03 04 05 06
Profit and Dividend
Profit per share Dividend
(for 2006, in accordance with the Board of Directors’ proposal)
shaResplit
The Board of Directors the Board of Directors propo- ses that the 2007 Annual Meeting of shareholders will resolve to carry out a share split 2:1 to improve the liquidity in the share.
The Beijer share
shaRedevelopMent
shaReholdeRson 2006-12-31
a shaRes B shaRes total capital votes
Jürgensen, Peter Jessen 223 813 404 600 628 413 10.1 % 21.9 % Magnusson, Joen (private & companies) 236 378 71 258 307 636 4.9 % 20.2 % Bertland, Per (private & companies) 146 714 63 000 209 714 3.4 % 12.7 %
Lannebo fonder 575 600 575 600 9.3 % 4.8 %
Livförsäkringsaktiebolaget Skandia 570 600 570 600 9.2 % 4.7 % Hain, Jan (private & companies) 40 000 60 000 100 000 1.6 % 3.8 % SEB Sverige småbolagsfond 442 200 442 200 7.1 % 3.7 % Ekdahl, Gunnar (private & companies) 414 800 414 800 6.7 % 3.4 % Länsförsäkringar fonder 258 200 258 200 4.2 % 2.1 % Riksbankens jubileumsfond 200 000 200 000 3.2 % 1.7 % Skandia fond småbolag 186 815 186 815 3.0 % 1.6 %
Nordea fonder 165 200 165 200 2.7 % 1.4 %
Bjurman, Torsten (private & companies) 140 200 140 200 2.3 % 1.2 %
Banco småbolag 126 000 126 000 2.0 % 1.0 %
SIF 120 000 120 000 1.9 % 1.0 %
AMF Pension aktiefond småbolag 71 300 71 300 1.1 % 0.6 % Handelsbankens småbolagsfond 70 600 70 600 1.1 % 0.6 % G & L Beijers personalstiftelse 70 000 70 000 1.1 % 0.6 %
Carlson fonder 65 624 65 624 1.1 % 0.5 %
Öresund 57 000 57 000 0.9 % 0.5 %
Robur småbolagsfond 51 000 51 000 0.8 % 0.4 %
Dunkerstiftelserna 50 000 50 000 0.8 % 0.4 %
Total holders of >50 000 shares 646 905 4 233 997 4 880 902 78.5 % 88.8 %
Other owners 300 1 318 486 1 318 786 21.5 % 11.2 %
Shares in own custody 21 800 21 800
Total 647 205 5 574 283 6 221 488 100.0 % 100.0 %
Votes 12 046 333
shaRe data (sek)
2006 2005 2004 2003 2002 Profit per share 1 17.59 11.72 5.65 5.53 6.26 Profit per share
after standard tax 2 18.19 11.62 5.47 5.85 6.73
Equity per share 3 87 77 67 65 65
Dividend 4 6.50 5.00 4.25 4.00 4.00
Market value 5 217 178 133 81 68
Yield, % 6 3.0 2.8 3.2 4.9 5.9
Cash flow per share 7 23.09 14.84 7.79 10.75 9.80 definitions
1) Net profit for the year divided by the average number of outstanding shares.
2) Profit for the year before taxes reduced by 28 per cent tax divided by the average number of outstanding shares.
3) Shareholders’ equity divided by the number of outstanding shares at year end.
4) For 2006, in accordance with the Board of Directors’ proposal.
5) On 31 December.
6) Dividend in relation to market value.
7) Cash flow from current operations before changes in working capital divided by the average number of outstanding shares.
shaRedatapeRRegisteRedowneR (sek)
owneRsof nuMBeRofshaRes peRcent nuMBeRofowneRs
1-500 219 648 3.5 2 218
501-1000 152 126 2.4 184
1001-2000 116 399 1.9 72
2001-5000 191 399 3.1 58
5001-10000 146 531 2.4 19
10001-20000 264 356 4.2 16
20001-50000 494 060 7.9 16
50001-100000 577 024 9.3 9
100001- 4 059 945 65.3 15
Total 6 221 488 100.0 2 607
40 60 80 100 120 140 160 180 200 220 240
02 03 04 05 06 07
B Share SIX General Index
The trading companies’ renaissance in the stock market
Trading companies show
good stability and durability
Swedish trading companies have enjoyed something of a renaissance in the Swedish stock market. The list of the number of trading-oriented listed companies has become longer and longer during the 21st cen- tury. The latest addition was the steel wholesaler, BE Group, which was listed in November 2006.
The sector, which the Affärsvärlden magazine terms
‘Wholesalers’, currently consists of ten companies.
The new trend started when G & L Beijer distributed and listed its subsidiary, Beijer Electronics, in 2000.
Thereafter, Bergman & Beving listed its subsidiaries, Addtech and Lagercrantz, in 2001. Indutrade came to the stock market during the autumn of 2005 and the latest addition is, as indicated, BE Group.
If retail companies are included, the list becomes even longer. Since the end of the 1990s, for ex- ample, Axfood, Clas Ohlsson, Hakon Invest, Hemtex and Kapp-Ahl have been listed on the stock market.
The stock market’s ’wholesale companies’ normally operate in an earlier stage than the retailers and are mainly directed at the manufacturing, building and process industries. None of them describes themsel- ves as purely a wholesaler. They are more of what is termed ‘distributor’ in contrast to ‘wholesaler’. G & L Beijer’s business concept, for example, is based on technology-oriented trading and distribution which creates added value for the customers.
The other companies in the sector group have a simi- lar orientation. They differ from wholesalers by con- tributing technical expertise relating to components, product, systems and solutions. Very often, they can also offer training, support and other services. The companies usually represent internationally operating manufacturers and producers in northern Europe where the majority of Swedish trading companies have a large proportion of the sales.
closeRelationshipswith supplieRs
The operations are usually based on close rela- tionships with the suppliers, partly through agency agreements. A distributor can be ranked in the same category as a supplier’s own sales organisation in a country or a region.
Thus, there is much in common between the different trading companies. At the same time, they differ relatively strongly with regard to direction, both from a product viewpoint and strategically. Some even develop and manufacture their own products.
The trading companies’ renaissance in the stock market
G & L Beijer, for example, has its own manufactur- ing capability of heat exchangers for the European market. Beijer Electronics has its own development of operator terminals for the global automation market.
Regardless of similarities and differences between the companies, the sector per se has been able to show a positive trend in recent years. Their total sales for 2006 amounted to nearly SEK 29M, equivalent to an increase of approximately 18 per cent. This is high bearing in mind that the sector is, essentially, mature. The majority of the companies certainly have acquisition as part of their growth strategy. However, a significant proportion of growth during 2006 was organic.
pRofitaBlegRowth
As far as can be judged, the growth was profitable.
The companies’ combined operating profit amounted to SEK 2.3 billion, equivalent to an increase of 55 per cent.
The favourable trend can partly be explained by the strong economy. At the same time, however, tra- ding companies frequently show good stability and durability. G & L Beijer, which celebrated its 140th anniversary in 2006, has succeeded in responding to changes such as technical development, new pro- ducts and services, new and changed market condi- tions, and new production methods.
The focus on trading has always been the predo- minant feature in the company’s strategy. It is cer- tainly an important part of the explanation for the company’s ability to survive. It is simply easier to adapt a trading operation to the developments and changes in the surrounding world. Readiness for change and adaptations of the operations run like a red thread through G & L Beijer’s history.
*) Company with a split financial year. The figures for 2006 refer to twelve months’ average.
Sales 2006, Change from Operating profit Change from Market value on
sek m 2005, % 2006, sek m 2005, % 31 Dec 2006, sek m
Addtech* 3 553 15 329 41 3 250
BE Group 6 681 15 550 108 3 525
Beijer Electronics 735 20 77 28 989
Bergman & Beving* 6 137 31 393 44 5 417
Elektronikgruppen 827 16 44 52 386
G & L Beijer AB 2 592 11 172 55 1 350
Indutrade 4 516 18 436 35 5 400
Lagercrantz* 1 848 20 81 523 908
Malmbergs El 548 11 56 20 544
OEM International 1 450 6 127 16 1 460
Total 28 887 18 2 265 55 23 229
Business concept, objectives and strategies
The business areas work under different prerequisites
Businessconcept
G & L Beijer is a technology-oriented Group,
operating in industrial trading and distribution which, through a combination of added-value agency products and products of the company’s own development, offers competitive solutions for a large number of customers.
oBjectives
G & L Beijer aims to create scope for strong growth within the Group’s two business areas - Beijer Ref and Beijer Industrial Technology. The parent company, together with the business areas, has set targets for the respective area.
Beijer Ref aims to strengthen its position as the leading operator in Europe even further and increase its business operations in additional markets in Europe.
Beijer Industrial Technology aims to strengthen its position as one of the leading suppliers, primarily in the Nordic countries. The objective is to increase the growth rate and achieve a significantly higher sales volume.
The Group’s business areas operate in mature mar- kets and the objectives are to grow faster than the market within the respective area.
The Group aims to achieve a return on capital em- ployed in operations of at least 11 per cent.
The Group normally has good cash flows and a high dividend capacity. The objective is to distribute 30 - 70 per cent of profit after tax. However, the level will be weighted every year against the Group’s capital requirements and prospects for the future.
The equity ratio should not normally fall below 30 per cent.
stRategies
G & L Beijer focuses its operations on the Beijer Ref and Beijer Industrial Technology business areas. The business areas operate under different prerequisites and, therefore, have different strategies.
Beijer Ref’s resources are mainly concentrated on the trading operations. The strategy for continued growth is to develop the operations in existing markets through organic growth and supplementary acqui- sitions, and acquisitions in new markets in Europe.
From a product viewpoint, air conditioning will be given priority for developing the operation.
Beijer Industrial Technology will focus the resources on its core operations - industrial products as well as the hose and rubber operations. The target for or- ganic growth starts from the potential in the existing customer base. In addition, the product range will be supplemented with new products. Increased acqui- sition activity will be given priority. The focus is on companies and operations with products, both pro- ducts which exist within Beijer Industrial Technology’s existing range and products that supplement it.
The Group will offer large customer groups solutions which create added value.
The Group gives priority to long-term and stable business relationships.
Beijer Ref has supplied dry coolers to the newly-constructed hospital, Mater Dei in Malta. These are included as a part of the air conditioning plant which creates a stable indoor climate in the building.
Business concept, objectives and strategies
The Group will optimise the diverse requests of dif- ferent interested parties. The primary interest groups consist of shareholders, customers, employees and suppliers.
BusinessModel
G & L Beijer’s business model has been sustainable and stable over the years. The fundamental concept is the focus on trading operations and distribution of industrial products and refrigeration components. The Group’s value chain consists of agency agreements, purchasing, some manufacturing, processing and customer adaptation of products by contributing technical expertise, efficient logistics and warehou- sing, system solutions and technical support and service. Vis-a-vis G & L Beijer’s suppliers, the Group accounts for knowledge and experience of the mar- ket and customer needs and demands.
Long-term planning, stability and tradition are charac- teristics which typify G & L Beijer’s relationships with suppliers and customers. At the same time, the ability to change is also an important cornerstone.
The Group has undergone gradual changes and adaptations to new market conditions. Operations have been divested or distributed and new opera- tions have been added.
Due to a new market scenario and changed compe- titive prerequisites, Beijer Industrial Technology made a strategic decision to divest the operation within consumer products which was implemented during 2006.
Together, Beijer Ref and Beijer Industrial Technology have a comprehensive product range which covers most sectors. The Group offers the market up to 50,000 items. However, from a product viewpoint there are only minor points of contact between the two business areas. What the business areas do have in common is that they focus on different com- petencies relating to trading and distribution opera- tions.
The two business areas also give a diversity with a focus on components, manufacturing supplies, system solutions and spare parts. This means that the Group is less sensitive to fluctuations in general economic activity whilst helping to balance seasonal variations for the respective business area.
G & L Beijer has a good geographic spread with sales in fifteen countries in Europe. The total number of customers amounts to more than 20,000.
The Group’s markets are mature and show mode- rate growth. G & L Beijer strives to increase growth, partly through acquisition. Acquisitions are difficult to plan from a time viewpoint and once they have been implemented, an integration process will take over.
Through the acquisition strategy, the two business areas have complemented each other and, by turns, contributed to a balanced and even growth for the Group as a whole. Over the past five years, 2002- 2006, the Group has reported average growth of 14 per cent per annum.
The robust business model and the extensive ope- rations also generate stable results. The operating margin (operating profit in relation to sales) has averaged 4.8 per cent during the five-year period. It has also shown relatively small variations with a high of 6.6 per cent and a low of 3.1 per cent. Return on capital employed in operations has averaged 11.2 per cent. Return has varied between 16.6 per cent and 7.4 per cent.
G & L Beijer’s value-creation benefits its shareholders in the form of dividend and potential price growth.
The dividend over the past five years has averaged 58 per cent of profit after tax. G & L Beijer’s share- holders have received a total yield (dividend plus share price growth) of 27 per cent per annum on average during the five-year period, 2002-2006.
The comparable index - the Six Return Index - rose by 13 per cent per annum on average during the same period.
18%
15
12
9
6
3
0 02 03 04 05 06
Return on capital employed in operations
Over the past five year period, the Group has reported average growth of 14 per cent per annum
sek m 3000
2500
2000
1500
1000
500
0 02 03 04 05 06
Net sales
Return on capital employed in operations has amounted to 11.2 per cent on average
Beijer Group, operations 2006
Strong growth
with very high profitability
The G & L Beijer Group is focused on trading and distribution operations within refrigeration products, industrial products and hose and rubber products.
The product programme consists mainly of the impor- tation of agency products and the manufacturing of own products.
Overall, operations are controlled by the Board of Directors and the parent company through target formulation and target monitoring of the Group’s two business areas - Beijer Ref and Beijer Industrial Technology. The parent company acts through work on the Board of Directors of the business areas and takes a proactive part in acquisition processes, strate- gic decisions, etc.
During the year, the economic trend in Europe was favourable with gradually improved growth. The development was especially strong in the Nordic countries. In total, the G & L Beijer Group could report its best year so far, with both increased sales and increased results for the 2006 full year.
It was, in particular, the Beijer Ref business area that accounted for the improvements. The development during the year confirmed the success of the acquisi- tion of Elsmark Holding in mid-2004 and the ensuing integration into Beijer Ref. Beijer Ref strengthened its position in the market and is now a well-known and leading operator within the refrigeration sector in Europe.
Overall, the Beijer Industrial Technology business area reported an average year during 2006. The bu- siness area’s core operations - industrial products and hose and rubber products - developed positively with both increased sales and results. The business area’s consumer products, on the other hand, were hit by problems as a consequence of changed market conditions and strong price pressure. After a change of strategy, Beijer Industrial Technology decided to divest the operation within consumer products. ETC Tools was sold at beginning of October 2006 and
BOLTHI, which was the residual part of consumer products, was divested at the end of the year.
During the year, the Group and the two business areas carried out a comprehensive strategic review.
The Group’s overall objective is to create prerequisi- tes for growth within both business areas.
The objective of Beijer Ref, to strengthen its position as the leading operator in Europe, stands. The resour- ces will, in particular, be concentrated on the trading operations. The strategy for continued growth is to develop the operations in existing markets, partly through acquisition and by making acquisitions in new markets in Europe. From a product viewpoint, air-conditioning will be given an increased focus for developing the operation.
Following the divestment of consumer products, Beijer Industrial Technology will focus the resources on its core operations - industrial products and hose and rubber operations. The objective is to create profita- ble expansion and raise the growth rate in order to achieve a significantly higher sales volume. The ob- jective for the organic growth starts from the potential in the existing customer base. The product range will also be supplemented with new products. The new strategy also gives significantly greater priority to acquisitions. The focus is on companies and opera- tions with new, but complementary, products to Beijer Industrial Technology’s existing product range.
sales
Consolidated sales increased by 11 per cent to SEK 2,592.2M (2,332.9). The increase is mainly explai- ned by organic growth.
Sales of Beijer Ref increased by 16 per cent to SEK 2,018.3M (1,743.2), equivalent to 78 per cent (75) of Group sales. Beijer Industrial Technology’s sales fell to SEK 573.9M (589.7), equivalent to 22 per cent (25) of Group sales.
Beijer Group, operations 2006
opeRating pRofit
The Group’s operating profit rose by 55 per cent to SEK 171.8M (110.6). Beijer Ref contributed SEK 150.4M (85.3). Beijer Industrial Technology’s profit amounted to SEK 38.1M (41.8).
pRofitafteRfinancialincoMeandexpenses, andtax
Financial income and expenses amounted to SEK -15.2M (-10.6). Financial income and expenses for 2006 included a share in profits of SEK 6.4M from the Group’s indirect ownership in CMP (Copenha- gen Malmö Port). Financial income and expenses for 2005 included a capital gain of SEK 6.4M from the sale of the shares in Malmö Hamn. Profit before taxes amounted to SEK 156.6M (100.0). Profit after tax amounted to SEK 109.2M (72.1).
pRofitaBility
Return on capital employed in operations and capi- tal employed amounted to 16.6 per cent (10.9) and 16.5 per cent (11.6) respectively. Return on equity was 21.5 per cent (16.2).
otheRfinancialinfoRMation
The Group’s investments in fixed assets and acquisi- tions amounted to SEK 33.8M (49.0). The cash flow from current operations before changes in working capital was SEK 143.1M (92.0). The net debt amoun- ted to SEK 487.4M (561.5) at the turn of the year.
On the same date, shareholders equity amounted to SEK 536.4M (479.7). At the turn of the year, the Group had a debt/equity ratio of 1.1 (1.3) and an equity ratio of 34.8 per cent (32.8).
paRentcoMpany
The parent company, G & L Beijer AB, reported profit after financial income and expenses of SEK 33.2M (30.4). Profit after tax amounted to SEK 38.8M (39.6). At the turn of the year, loan financing was SEK 218.5M (222.5). The parent company’s invest- ments amounted to SEK 0.1M (10.7).
cuRRency
G & L Beijer’s sales are mainly transacted in Europe.
SEK accounts for 32 per cent of total sales, EUR for 22 per cent, GBP for 19 per cent, DKK for 10 per cent and NOK for eight per cent. EUR accounted for 42 per cent of purchases, SEK for 22 per cent, other European currencies for 34 per cent and USD for two per cent.
oRganisation andstaff
G & L Beijer has a decentralised organisation. Ope- rations are carried out in a number of subsidiaries which are coordinated under the respective business area - Beijer Ref and Beijer Industrial Technology. The control of the operations is carried out through target formulation and monitoring of set targets. The parent company has overall responsibility for Group mana- gement and Group control.
In 2006, the Group had an average of 907 employ- ees (919), of whom 79 per cent of the total number of employees are men. The parent company, inclu- ding Beijer Förvaltning AB, had six employees (6) on average. The number of employees in Beijer Ref was 708 (719) and in Beijer Industrial Technology 193 (194).
enviRonMentalpolicy
G & L Beijer will contribute to ecologically sustai- nable development. The Group will offer advanced technical services and products which meet customer requirements and make the least possible impact on the environment throughout the product lifecycle within the constraints of what is technically possible and commercially defensible.
G & L Beijer will ensure that the Group’s environ- mental ambitions are communicated and observed through an open and objective dialogue with all inte- rested parties. The staff will continually be trained to assume responsibility for, and develop, the Group’s environmental work.
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BeijeR Ref BeijeR Ref
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BeijeR industRial technology BeijeR industRial technology
Beijer Ref
Beijer Ref is now a well-known and
leading operator within the refrigeration sector in Europe
2006 opeRations
Beijer Ref enjoyed a very success- ful year in 2006. Both sales and operating profit increased strong- ly. The improvements took place gradually and were strengthened during the course of the year.
Growth was wholly organic. The increase is mainly explained by an improved economic trend in Europe. At the same time, Beijer Ref moved its position forward in the markets and won market share.
The development confirms that the acquisition of Elsmark in mid 2004 has been successful. Many of the measures implemented earlier generated significant results during 2006. Beijer Ref is now a well-known and leading operator within the refrigeration sector in Europe. Size is an important com- petitive factor. Beijer Ref can now offer a more competitive product portfolio combined with technical competence and system solutions.
Beijer Ref is working increasingly across the borders between diffe- rent countries and can, therefore, take advantage of the respec- tive companies’ experiences, for example, by applying a solution in one market which has been developed in another market. The Elsmark companies have been transformed and consolidated into independent wholesale opera- tions. They have also contributed significant competence within air- conditioning to the other Beijer Ref companies which, in turn, have contributed competence and an
expanded product range within the refrigeration wholesale opera- tion to the Elsmark companies.
Taken together, this has strengthe- ned Beijer Ref and contributed to its growth. Co-ordinated purcha- ses with better purchasing prices, restructurings and rationalisations are the effects of the acquisition which, in addition to increased volumes, had a positive effect on the results.
The Elsmark companies are on their way to achieving the same operating margins as the other Beijer Ref companies, but there is still room for improvement. The operation in Hungary has been re- structured after Beijer Ref acquired the remaining 49 per cent of the Hungarian refrigeration wholesa- ler, Equinoxe SP, at the beginning of 2006. Equinoxe is the market
leader within the wholesale refri- geration sector in Hungary with sales of approximately SEK 50M.
At the end of 2006, Beijer Ref acquired the Danish refrigeration wholesaler, Air-Con, which reports annual sales of approximately SEK 40M. The company is included in Beijer’s accounts from 1 January 2007. The vendor was a Swedish company, Tesab, which is a fran- chise organisation for refrigeration installation contractors. Air-Con has been incorporated into Beijer Ref’s Danish operation. The acqui- sition generates immediate structu- ral cost savings whilst a co-ordina- tion of purchases gives a potential for lower purchasing prices. In the medium term, Beijer Ref can deve- lop the operation in Air-Con with an expanded product programme and contribute technical compe- tence and support. In connection
The Hungarian bake-off company, Fornetti, currently has more than 3,000 stores in around ten countries in Europe. An unbroken refrigeration chain contributes to minimal product variation and high product security for the customer. Fornetti is one of the companies to which Beijer Ref delivers refrigeration plant via the Hungarian company, Equinoxe.
Beijer Ref
The Beijer Ref business area markets and sells complete refrigeration systems and refrigeration components in 15 European countries
with the transaction, the collabora- tion between Beijer Ref and Tesab is strengthened. Tesab is one of the Beijer Ref’s largest Swedish customers.
During the year, Beijer Ref car- ried out a strategic review of its operations. The objective, to strengthen its position as a leading operator in Europe even further, stands. The resources will, in particular, be concentrated on the trading operations. The strategy for continued growth is to develop the operations in existing markets, partly through acquisition and to make acquisitions in new markets in Europe. From a product view- point, there will be an increased focus on air-conditioning and the operation will be developed. The market for air-conditioning is a growth market.
As a step in the strategy of con- centrating its resources on the trading operation, Beijer Ref divested its Finnish subsidiary, Oy Dimico AB, after the end of the financial year. Dimico manufac- tures coils for the Finnish market and reported annual sales of ap- proximately SEK 20M. As from 1 January 2007, Dimico is no longer included in the Group’s accounts.
Beijer Ref’s remaining operation in Finland is a concentrated trading operation which reports sales of approximately SEK 110M.
sales
The business area’s sales in- creased by 16 per cent to SEK 2,018.3M (1,743.2). Sales in-
creased in virtually all markets in which Beijer Ref operates. Sales in Ireland, the Baltic States, Poland, Denmark and the Netherlands grew strongest, by 27 per cent on average. In the United Kingdom, which is the business area’s largest single market, sales increased by 15 per cent. In Norway and Finland, sales rose by 18 per cent and in Sweden by nine per cent.
Sales within the wholesale and tra- ding companies increased by 14 per cent and by 26 per cent within the manufacturing companies.
The wholesale and trading compa- nies accounted for 88 per cent of the business area’s sales and the manufacturing companies for the remaining 12 per cent.
opeRatingpRofit
The business area’s operating profit rose by 76 per cent to SEK 150.4M (85.3), equivalent to an operating margin of 7.5 per cent (4.9). The significant profit impro- vement is explained by increased sales volumes and the effects of previous savings programmes.
The results of both the wholesale and trading companies and of the manufacturing companies impro- ved significantly.
Pictures from above:
1/ Equinoxe’s head office in Budapest, Hungary 2/ A Beijer Ref delivery of refrigeration equipment - for both climate control and freezing - to a chicken breeding plant in the Romanian city of Botosani 3/ Examples of refrigeration systems
which Beijer Ref delivers to the bake-off company, Fornetti 4 & 5/ The Beijer Ref companies’ head offices in Raszyn, Poland and Timisoara, Romania
Beijer Ref
This is Beijer Ref
The Beijer Ref business area is the leading refrigeration whole- saler and manufacturer of heat exchangers in Europe with sales in
15 countries. Operations are carried out in two segments: Wholesale & trading companies and Manufacturing companies.
Beijer Ref’s competitive edge lies in its technical competence relating to the products, its comprehensive product range and its ability to offer efficient overall solutions.
pRoducts
Beijer Ref markets and sells complete refrigeration systems as well as components for refrigeration systems. The product range consists of products de- veloped by the company and agency products. The offer to customers is characterised by turnkey system solutions which simplify installation.
Beijer Ref’s products are mainly used in refrigeration and freezer counters, refrigeration and cold storage rooms, as well as for air-conditioning and ventila- tion systems. The products are found in different environments such as food stores, shopping centres, factories, offices, computer rooms, ice rinks, private residences and hotels.
In simple terms, a complete refrigeration system consists of the following components:
• A compressor which pumps a refrigerant through a cooling system.
• A refrigerant which transports heat away from the refrigerated area.
• Heat exchangers of various types such as evaporators, condensers or coolers.
The evaporator removes the heat from the refrigera- ted area. The condenser discharges heat assimilated in the refrigerated circuit. Evaporators and conden- sers work with refrigerants in both liquid and gaseo- us form. Coolers use only liquids as refrigerants.
Beijer Ref offers the market a total of 15,000 different products in the refrigeration sector. Operations are carried out in two segments:
- wholesale and trading companies - manufacturing companies.
wholesaleandtRadingcoMpanies
Beijer Ref’s wholesale and trading companies are the leading operators in Europe. The companies have agencies for a number of products within the refrigeration segment such as compressors, refrige-
rants, control and monitoring equipment, and various components. Beijer Ref represents leading companies in the sector within different product areas, including Bitzer, Danfoss, Outokumpu, Armacell, Tecumseh, Alco, Electrolux, Honeywell, Ineos, Carel, Johnson Controls, AIA, Luve, Searle, and Henry.
The Swedish and Norwegian wholesalers also produce customised fluid-refrigerating units. Comfort cooling (air-conditioning) is sold on an agency basis from the Japanese companies, Mitsubishi Heavy Industries and Daikin, and from the Italian company, Aermec, and the South Korean company, LG. Aircool air-conditioning unit is an own-brand product.
Beijer Ref’s competitive edge lies in its technical com- petence relating to the products, an extensive and varied product range and, in particular, opportunities to offer customers efficient overall solutions. In addi- tion, Beijer Ref enjoys long-term durable relationships with its customers.
The wholesale and trading companies account for approximately 90 per cent of the business area’s sales.
ManufactuRing coMpanies
The manufacturing companies carry out develop- ment, manufacturing and sales of the business area’s own products such as heat exchangers, evaporators and condensers. Production is carried out in Sweden and Norway. The products complement each other well in terms of customer segment and production technology, which provides integrated technical and marketing strength.
The manufacturing companies account for approx- imately 10 per cent of the business area’s sales.
Approximately 80 per cent of the manufacturing company’s sales are made to external customers and the remaining 20 per cent are delivered to the busi- ness area’s wholesale and trading companies.
Beijer Ref
MaRketandMaRketsegMents
Beijer Ref is established in 15 markets in Europe:
Sweden, Denmark, Norway, Finland, United King- dom and Ireland, the Netherlands, Switzerland, Poland, the three Baltic States, Hungary, Romania and Russia.
coMpetitoRs
Beijer Ref is the leading company in Europe, with a market share of 10 per cent. Major competitors of the wholesale and trading companies in Europe are the US-owned company, Carrier; the Spanish compa- ny, Pecomat; and the German companies, Schiessel, Frigotechnik and Reiss. The Nordic competitors are Ahlsell and Onninen. In addition there are a large number of small competitors.
The manufacturing companies face competition from Alfa Laval, Carrier and Coil-Tech, Güntner and Searle.
The market is split into three segments: commercial refrigeration, industrial refrigeration and comfort cooling.
• coMMeRcialRefRigeRation dominates the business area and consists mainly of complete refrigeration systems and components for refrigeration systems.
The food retail sector and the restaurant sector are the largest customer groups.
• industRialRefRigeRation is mainly used by food indu- stries, process refrigeration, ice rinks and in large heat pumps.
• coMfoRtcooling is air-conditioning for offices, pri- vate residences and cars, and heat pumps.
Demand in the business area’s largest segment, commercial refrigeration, is relatively stable and only partly varies with the economic trend. Rising consumption of refrigerated and frozen products, as well as the establishment of new food supermar- kets, benefits the segment. In addition, the market is being positively affected by decisions made by the authorities, such as the requirement to convert to more environmentally-friendly refrigerants. The market for comfort cooling enjoys strong growth as climate installations in work locations and in cars are beco- ming increasingly common.
Beijer Ref’s sales are mainly made to refrigeration installation contractors, service companies and manu- facturers of refrigeration products which, in turn, de- liver to end customers. The market consists of a small number of large customers and a significant number of small and medium-sized customers.
Per Bertland Head of the Beijer Ref
business area
netsalesandResults
sek m 2006 2005 2004 2003 2002
Net sales 2018.3 1743.2 1405.6 874.3 914.8 Operating profit 150.4 85.3 39.2 59.3 69.8 Return on capital employed
in operations, % 20.2 11.4 7.3 18.3 20.5
No. of employees 708 719 634 443 472
geogRaphicdistRiBution ofnetsales
distRiBution ofnetsales
Figures for 2004-2006 are recalculated in accordance with IFRS whereas information for previous years is reported in accordance with reporting principles applicable at the time. Operating profit for 2002- 2003 does not include goodwill for comparative reasons.
1. United Kingdom 25%, 2. Sweden 18%, 3. The Netherlands 13%,
4. Denmark 12%, 5. Norway 8%, 6. Finland 6%, 7. Switzerland 5%, 8. Other European countries 12%, 9. Rest of the world 1%
1. Wholesale and trading companies 88%,
2. Manufacturing companies 12%
9 1
2 4 3
5 6
7 8
1 2
Beijer Industrial Technology
A stable development has laid the foundation for a new strategy for increased growth
2006 opeRations
Beijer Industrial Technology business area’s core operations - industrial products and hose and rubber products - developed posi- tively during 2006. Both sales and operating profit increased, partly due to the strong industrial trend.
The new business plan resulted in a number of strategic measures during the financial year. After a change of strategy, Beijer Indu- strial Technology decided to divest its operations within consumer products segment during 2006.
ETC Tools was sold to Edw. H.
Thomee AB at the beginning of October. At the end of the year, the remaining part of consumer products - BOLTHI - was divested to a former employee. The sold operations reported total annual sales of approximately SEK 30M.
During the year, Beijer Industrial Technology carried out a couple of minor acquisitions. The opera- tion in YGAB Eldfast AB, which re- ports annual sales of approximate- ly SEK 5M, was acquired in May.
YGAB sells and installs refractory materials for different types of fur- naces. The main customer groups are found in the foundry and steel industries. In December, the grin- ding materials operation, which reports annual sales of approxima- tely SEK 4M, was acquired from Logitool AB. The operation consists of conventional grinding materials, rotary files, polishing materials, etc. and supplements Beijer Indu- strial Technology’s existing product range within the segment.
In August, the business area, together with SMS Demag AG of Germany, received an important order for a new down coiler from SSAB Tunnplåt in Borlänge. The deliveries, which comprise both mechanical equipment and elec- tronic automation, will be made in stages until summer 2008. The order is a commission transaction.
During the year, Beijer Industrial Technology made a decision to change the direction of the opera- tion in Fyleverken which extracts silicon sand. The new strategy in- volves a focus on more profitable niche markets. In 2006, Fylever- ken received a renewed extraction permit until 2018. In connection with this, a decision was made
regarding an action programme aimed at improving the production plant, working environment and external environment.
sales
Beijer Industrial Technology’s sales amounted to SEK 573.9M (589.7). Sales within the hose and rubber operations and the indu- strial products segment increased compared with the previous year.
The total fall in sales is explained by lower sales within the consu- mer product operations and the divestments of these operations during the last quarter of the year.
Excluding consumer products the business area’s sales increased to SEK 544.4M (531.8).
The picture shows a fish pump hose, 12” (300mm), in use in the North Sea. For the efficient handling of large catches, the fish are pumped directly into the vessel.
This type of hose is supplied by the Beijer company, Lundgrens Sverige AB.
Photo: Önnereds Svets AB, Sweden
Beijer Industrial Technology
The Industrial Technology business area markets and sells components, maintenance products, machinery and plant to the manufacturing industry and hose and rubber products to the commercial, industrial and shipping sectors. The business area is mainly active in the Swedish, Norwegian and Finnish markets.
During the past two years, Beijer Indu- strial Technology has been involved in a comprehensive strategy review. The work has resulted in a new business plan in which the business area will focus on its core operations – indu- strial products and hose and rubber products. The objective is to create a profitable expansion and raise the growth rate, both organically and through acquisition, in order to ac- hieve a significantly increased sales volume.
Beijer Industrial Technology’s core competence is in value-creating tech- nology trading. The business objective is to carry out technology trading with the overall vision to create compe- titive solutions for the customer. The solutions consist of offering product combinations, improvements, inno- vation and service which provide added value for the customer. The offer will be supplemented with new and related products. Beijer Industrial Technology’s task is to improve the customer’s productivity, quality and efficiency.
The business area’s different compa- nies have so far developed success- fully within their respective segments.
Changes create new prerequisites.
This will involve consolidation among customers as well as competitors and suppliers; both forward and back- ward integration in the value chain;
and technical development. Industries in the both the Nordic and other European countries are increasingly moving towards high technology and increased quality.
Taken together, size and competence will be increasingly crucial in the market.
A cornerstone of the new strategy is, therefore, increased co-ordination between the business area’s different companies aimed at raising the com- bined effectiveness and efficiency.
The co-ordination concerns marketing, training, product supply, purchasing, logistics, etc, whilst maintaining de- centralisation and significant indepen- dence for the individual companies.
The new strategy includes a continued focus on market orientation.
The objective for the organic growth starts from the potential in the existing customer base and the needs of the individual customers. There is signifi- cant scope for increasing the sales of the business area’s existing product range in the present markets.
The new strategy also gives signifi- cantly greater priority to acquisition.
The objective is to acquire companies which, taken together, will gene- rate a significant contribution to the business area’s sales. The focus is on companies and operations with pro- ducts. This is both for products which already exist within Beijer Industrial Technology’s current range and for products which supplement it.
t
he oBjective is to achieve significantly incReased sales Sales of hose and rubber productsenjoyed the best development with an increase of 11 per cent.
The high organic growth is due to gradually increasing demand for maintenance products during the past two years.
Following several years of organic growth, the market for industrial products levelled out during 2006.
Sales of industrial products were largely on a par with the previous year. Steel products and foundry operations, as well as grinding materials, showed a continued positive trend.
The acquisitions affected the business area sales only margi- nally. Sales in the Swedish market excluding consumer products rose by 3.5 per cent and accounted for 84 per cent of the business area sales.
opeRating pRofit
Operating profit amounted to SEK 38.1M (41.8), equivalent to an operating margin of 6.6 per cent (7.1). Profit was affected by consumer products and costs for Fyleverken. Excluding consumer products, profit increased.
